Doesn't Anyone Disagree With Warren Buffett About Taxes?

Warren Buffett used one of journalism’s most effective platforms this morning, the op-ed page of The New York Times, to renew his call for higher taxes on the rich. Buffett wants Congress to eliminate the Bush tax cuts for Americans with incomes of $500,000 and up (higher than Pres. Obama’s proposal of $250,000). He also wants to impose a minimum tax rate of 30% on incomes of $1 million to $10 million, and a 35% rate on incomes above that. Buffett’s argument in the Times piece: savvy investors will not pass up an opportunity to put their money into lucrative ventures just because their earnings will be taxed at a higher rate. He points to his own actions, back in the 1950s, when marginal rates on dividends reached 91%. “I sold securities and did pretty well,” he writes. The idea that higher tax rates will stifle investment and productivity, he says, is bunk. “The ultrarich, including me, will forever pursue investment opportunities.”

We’ve been waiting all day to read some negative commentary about Buffett’s proposals, but instead, there has been a stream of praise. Henry Blodget penned a piece on Yahoo Finance entitled, “Why Warren Buffett Is Right About Raising Taxes on the Rich.” Blodget writes that spending cuts are also necessary if the deficit is to be effectively tackled, but “we have to raise taxes” as well, and the highest-earning Americans are the best place to start. Not surprisingly, Eliot Spitzer agrees with Blodget. Writing on Slate, he says we should all “listen to the wisest man in America” and carry out his sensible tax plan.

Perhaps it’s no surprise that left-leaning commentators are cheering for Buffett. But you would think that a conservative outlet like The National Review would blast any tax-hike proposal. Instead the Review has a mild piece by Jim Geraghty that praises Buffett for noting that Pres. Obama’s proposal to raise taxes on families making $250,000 and up would ensnare some middle-income taxpayers in parts of the country where the cost of living is high. Geraghty also points out that many states already impose their own “millionaire” tax on people earning more than, say, $175,000 in Hawaii, where they pay an 11% state income tax rate or a 9.9% rate on income over $125,000 in Oregon. But that’s all Geraghty says. The Review, it seems, doesn’t think Buffett’s proposal is such a bad idea.

On the American Enterprise Institute’s blog, business and economics writer James Pethokoukis quibbles with Buffett’s calculations of potential revenue raised from taxes versus spending cuts. Buffett says that the government should be able to bring in 18.5% of G.D.P. through taxes, and spend 21%. Pethokoukis insists that the Congressional Budget Office has already said the government can raise 18.5% of G.D.P. by 2022 without raising rates, simply by waiting for the economy to recover. As an aside, he writes that Buffett’s proposed tax hike would be “anti growth,” and goes on to make the familiar conservative argument that spending cuts are more effective than tax hikes, and note that in a weak economy, it is unwise to raise taxes. Nothing new there.

Buffett also invites some mild criticism from Harvard economist and former Mitt Romney economic advisor Greg Mankiw, who writes on his Wall Street Journal blog that Buffett has failed to come clean about his own tax avoidance strategies. If Congress were to implement Buffett’s proposal, writes Mankiw, Buffett himself would be largely unaffected, for the following reasons: His company, Berkshire Hathaway, doesn’t pay dividends, so his investors, including himself, don’t immediately pay income tax on gains. Also because he’s a long-term investor, he rarely sells and realizes a taxable capital gain. Further, he gives so much to charity, he gets big deductions on the full market value of the stocks he gives away, most of which are unrealized and therefore untaxed capital gains. Finally, when he dies, his heirs will enjoy a stepped-up basis and the government will never collect any revenue from all those unrealized capital gains. Again, none of these points are new or surprising.

Perhaps the criticism is muted because this is not the first time Buffett has made a plea for raising taxes on the wealthy. He made his famous “Buffett Rule” proposal to raise the income tax on those making more than $1 million to 30%, early last year. Or maybe the lack of criticism today is a sign that Republicans in Congress and their counterparts in the media are accepting that to avoid the fiscal cliff, the government will have to raise taxes on someone.